MDR could push small merchants, price-sensitive consumers back towards cash: GTRI

The Merchant Discount Rate (MDR) charges on UPI transactions above Rs 2,000 could push small merchants and price-sensitive consumers back towards cash, economic think tank GTRI said on Wednesday.

Effective October 15, UPI payments to merchants (P2M) above Rs 2,000 will attract a 0.4 per cent MDR with an overall cap of Rs 300. Besides, a flat concessional MDR of Rs 5 would be applicable on specific merchant categories such as railways, telecom services, insurance, and fuel for transaction above Rs 2,000.

"MDR could push small merchants and price-sensitive consumers back towards cash," GTRI Founder Ajay Srivastava said in a social media post.


He said that UPI fees are not about revenue as keeping UPI free costs the government Rs 2,000-2,500 crore annually.

"This is tiny compared with subsidies of Rs 2.03 lakh crore for food, Rs 1.68 lakh crore for fertilisers, Rs 22,800 crore for agricultural credit and Rs 12,500 crore for petroleum and LPG," he said adding the NPCI (National Payments Corporation of India) itself earned Rs 3,270 crore and retained a surplus of Rs 1,552 crore in FY2025.

He added that clearly, this is not a revenue problem and charging for UPI will not save public money.

"RBI spent Rs 4,875 crore in FY2026 on printing banknotes alone, excluding the cost of transporting, storing, guarding, counting and replacing cash," he said adding, "The real pressure thus is not the need for revenue. It could be Washington".

The USTR's 2026 report objected to the preferential position of UPI and RuPay, RuPay card payments through UPI and NPCI's proposed 30 per cent market-share cap.

Srivastava said that free UPI and RuPay divert billions of transactions away from Visa and Mastercard, which typically earn network fees of 1-3 per cent on card payments.

He added that Brazil has refused to weaken Pix, its UPI-like public payment system, despite US pressure and an additional 25 per cent tariff.

"India should have shown similar resolve. The government can easily afford free UPI; weakening it would impose far greater economic and strategic costs on India. And the US may soon press for restrictions on Rupay card, and withdrawal of NPCI's proposed 30 per cent market-share cap," he said.